What are the chances of you being investigated by the taxman?

Recent figures have shown that nearly 400,000 new cases are launched each year. That’s nearly 8,000 new cases every week. But, how would you react if the dreaded enquiry notice landed on your doormat?

In my experience, people generally react in three ways;

Bury your head in the sand and hope for the best – I wouldn’t recommend this!

Contact the Inspector straight away to try and resolve things – the Inspector is a friendly person and you want to come across as being helpful, right? – I wouldn’t recommend this either!

Take a deep breath and then contact your accountant

It goes without saying that your best bet is always option three! I’m not just saying this because I’m a tax investigation specialist. It’s more because I spent over 20 years in HMRC as a senior investigator and it is a fact that HMRC officers prefer to deal with good quality accountants and enquiry specialists. This is because they help manage the enquiry process and make life easier for everyone on both sides of the table.

Some enquiry letters can appear threatening, or even casual, to encourage a quick response, but don’t be fooled. While you need to act relatively quickly, you should not succumb to panic. Nor should you start thinking about how much it’s going to cost you to get professional help. Don’t start thinking of the enquiry as a DIY project, like if the taps are leaking or the car’s making a funny noise. It may cross your mind – why pay for someone else to fix it when you could have a little fiddle around and, hopefully, fix it yourself? The problem with dealing with HMRC on your own is that HMRC officers are highly trained and extremely astute people. They will be polite and professional to the extreme, even smiling and joking as they casually ask questions about your business and personal life. But make no mistake, the Inspector has spent many hours or days researching your business and preparing for the opening meeting and records review.

It is imperative that you have a good accountant in your corner. HMRC officers have wide ranging powers of inspection and can charge penalties if tax has been under-declared. But they must also work within specific legal boundaries. How would you respond if the Inspector turned up to your business premises and immediately asked for your books, records and private bank statements from the last six years? Similarly if mistakes have been made, a good accountant can work with HMRC to quantify the additional tax due as painlessly as possible, and then negotiate a penalty that is reasonable to the circumstances of the case

So, in conclusion, the three recommended steps to dealing with an HMRC enquiry notice are:

Take a deep breath

Take another deep breath and put the kettle on

Get an accountant

Neill was a former senior tax inspector and investigator with HMRC for over 20 years. Subsequently, he has been in practise for 10 years dealing with HMRC enquiries including COP9, COP8, Employer Compliance Reviews and IT/CT enquiries.